Brown seeks debt relief for flood victims

Efforts to rebuild the economies of Asian countries stricken by the Boxing Day tsunami will receive a $5bn (£2.6bn) a year boost from the west's richest countries next week, Gordon Brown said yesterday.

The chancellor expressed confidence that American and Japanese support for a UK proposal would mean that creditor nations would put a freeze on debt repayments which would save the worst affected countries of Indonesia and Sri Lanka $3bn a year alone.

With the government seeking to garner international support for debt relief for impoverished nations in Africa, Mr Brown said there was no reason why generosity to the flood victims of the Indian Ocean had to come at the expense of debt relief for sub-Saharan Africa.

Britain has made help for Africa a focal point of its joint presidencies of the G8 industrial nations and the European Union during 2005, and the chancellor said that assistance for Asia did not mean less for heavily indebted nations in the world's poorest continent.

"What my discussions with the IMF, the World Bank, the US treasury secretary and other financial leaders over the last few days have shown to me is that we never want to be in a position again where we have to choose between emergency aid and tackling the underlying causes of poverty. The world ought to be able to do both.

"That is why I will also be putting forward proposals for a new Marshall Plan for aid, trade and debt relief for the developing world to release sufficient resources through debt relief and through additional money to be provided by the richest countries and for trade justice so that we can deal with the underlying causes of poverty in Africa and else where as well as providing the aid for reconstruction. That is why 2005 will be a critical year for development under the UK's presidency."

The group of creditor nations known as the Paris Club will meet next week to discuss whether a debt moratorium should be agreed for those countries affected by the tsunami while the International Monetary Fund conducts an assessment of their economic needs.

Mr Brown said he expected the fund to complete its work in time for a meeting of G8 finance ministers in London in early February which will decide what further steps are necessary to help those countries worst hit by the coastal devastation caused by the floods.

The IMF and the World Bank are also expected to offer financial assistance over the coming days, with the IMF providing $1bn in loans and the Bank offering money for reconstruction.

The chancellor said the "$2bn figure which has been quoted as the world's contribution to deal with both the problems of first aid and reconstruction will rise very substantially, and Britain is going to play its part in making its contribution to that enhanced figure".

He added: "What people are realising as a result of this terrible tragedy is that what hap pens to the poorest citizen in the poorest country affects the richest citizen in the richest country. We are an interdependent world, one moral universe, and I think just as we see the power of nature to destroy, we have seen the power of human compassion to build, and it is on that - people's moral sense that something has got to be done - that we build the next stage of our efforts to achieve social justice on a global scale."

Fletcher Tembo, policy adviser at the development charity World Vision, said: "This is a good example of needs of the poor rather than the needs of the creditors or the international system driving the debt debate."

Simon Maxwell, director of the Overseas Development Institute, a UK thinktank, said: "Debt relief is one way to boost government budgets in the countries affected, but a lesson from debt relief elsewhere is that there need to be safeguards that extra money will really be spent on helping survivors rebuild livelihoods."

Mr Maxwell added that the challenge for Mr Brown was to ensure that the idea of a moratorium was extended to all countries affected by disaster, "including... poverty, malnutrition and HIV/Aids".